THE Reserve Bankâ€™s intention to issue out special money market bills with tenors of 90, 108 and 365 days whose rate are market-determined has slowed down bullish sentiments on the stock market.Â
The stock market has been subdued for the past four weeks due to lack of liquidity and the resuscitation of the money market is likely to further weaken the stock market as some of the much-needed liquidity would find its way to the risk free money market.
The stock market is expected to be depressed in the short term as it cleanses itself of speculators â€“â€“ who finally have a market they understand better â€“â€“ leaving the market with institutional investors that include pension funds, and other long-term investors,â€ Kingdom Stock brokers said this week.
Apart from lack of liquidity, there was no indication that heating bulls that had persisted during the first quarter of the year would cool off or that the finishing line for the bull run would be found before the Reserve Bankâ€™s announcement.
Apparently, money market rates, the only feasible instruments to cool overheating stocks have been depressed and the property market, the alternative investment vehicle, remained too expensive for broad participation.
However analyst this week said the stock market would be the preferred form of investment in the long term as it has potential to offer rewards above inflation as capacity utilisation increases.
Since the beginning of the year, capacity utilisation has gone up to an average of about 30% from a low of 10%. Companies such as Delta and Lafarge are said to have even gone above 60%.
The equities market continued to fall although it slightly gained yesterday after five consecutive days of losses.
For the local bourse, it is no longer a case of fundamentals;Â a depressed economy is normally mirrored by poor performance of the equities market and traditionally, economists have learnt to measure the health of an economy by looking at its stock market.
Political developments have also not been encouraging lately and foreign investors who had bombarded the market earlier on in the year are now staying away.
ZSE plays an integral part in mobilising resources for the development of the economy.
Since the resumption of trade in US dollars, both the industrial and mining indices have risen from the bases of 100 each to above 300%.
The local bourse is characterised by high transaction costs which at 7,5% are by far the highest in the region.